Unfortunate Economics

In a recent article on The Bleeding Heart Libertarian, Jason Brennan talks about the problem behavioral economics poses to apriorism in Austrian economic theory. He says that Austrian economics, advanced by “hack” scholars such as Ludwig von Mises and Murray Rothbard, bases its theory on the idea that all individuals act rationally. By this, we can assume him to mean that every individual acts purposefully and always makes the best choice given competing ends. Defenders of this Austrian apriorism are, to Jason Brennan, extremely naïve to believe this since behavioral economics data sets empirically refute the Austrian conception of man and choice over and over. For him, anyone with half a brain can figure out that humans don’t make choices that make them the best off economically, viz. they do not make value-maximizing choices. Brennan’s doctrine and perspectives on Mises and Rothbard are extremely convoluted and let’s see why.

Acting rational (redundant), from an outsider’s or non-Austrian perspective, can be defined as choosing the appropriate means to reach a particular end. There are two ways in which we usually characterize human action as irrational. First we may say that the means to achieve an end is irrational; we believe that either better means could be used to reach an end or the means chosen are utterly incomprehensible to the ends chosen. In essence, by saying this we believe that the only way man can act rationally is by choosing the absolute best means suited to reaching a particular end; nothing short of this will do. Second, we may say that the ends trying to be obtained are irrational; we believe the ends an individual has chosen are detrimental to their own well-being and is a foolish pursuit. No doubt, Brennan is focusing on the former.

As Jeffrey Herbener stated in his own refutation of Brennan, “Knowledge about human action learned by experience is contingent on the person, place, time, and circumstances of the action.” The problem characteristic of Brennan’s approach is behavioral economics attempts to define the circumstances surrounding a decision, a monumental task in the first place. Again, how can one truly know all the relevant circumstances surrounding a decision that would enable us to make a truly rational decision? Further, behavioral economics is a foolish pursuit because of one simple fact: value is subjective. Making the attempt (or lack of attempt) to quantify the subjective values an individual (let alone a group of individuals) holds is futile. These are not cardinal values; there is no way to measure them. Hence behavioral economics is going to make questionable conclusions because you have to arbitrarily quantify subjective values to even begin to create the framework for deciding whether someone’s behavior actually maximized value or not.

Moving on, we have to realize what is meant by purposeful human action, or “value-maximizing” human action. Since values are subjective, what is a value-maximizing choice for one individual may be different for another. The choice to go to McDonald’s and eat a double cheeseburger may be value maximizing for one, while staying home and cooking their own cheeseburger on the grill may be value maximizing for another. The science of human action says a priori when a human being makes a choice, he is displaying his preferences, and this action necessarily is a value-maximizing choice.

So many intangible factors go into deciding preferences; just because, given the choice, someone chooses the $7 an hour burger flipping job over the $9 an hour one does not mean that they acted irrationally. The fact that they chose the $7 an hour one means that some other tangible or intangible factors went into their demonstrated preference of the lower paying burger flipping job. Maybe their conscience won’t let them take a $9 an hour job when they know their marginal productivity of labor is only $8. Or maybe they like the number 7. Or maybe they asked their wife what job to choose. Or maybe they wanted to stick it to Austrian economists and try to prove that humans do not act rationally so they deliberately chose the lower paying job. Or maybe they went eeny, meeny, miny, moe and picked the $7 an hour job.

How could we possibly quantify these subjective factors? We cannot. Thus, we must understand that human action is demonstrated preference; a priori, choosing one thing over another means one values the thing they chose over the thing they did not choose, regardless of what we think about the prudence of their decision-making or the way they go about valuing things. That is what is truly meant by acting rational and maximizing values. It is not choosing the thing which will bring someone the greatest $ value, the greatest long-run happiness, the least amount of harm, or any other criterion that a behavioral economist will try to present as “rational.”

As Jeffrey Herbener said, “Whether a person chooses “rationally” in the neoclassical sense or “less than rationally” in the behavioral sense, in a human action the person chooses. Choice is a universal feature of human action. It is no mark against the Misesian conception of economic theory that it does not address the contingent features of human action. That’s the task of economic history.” Our opinion of what ends are appropriate or what means are appropriate to reach a particular end is subjective. To that extent, rationality, in the sense Jason Brennan means, is subjective. Just because the thief chooses to obtain an income by stealing rather than earning it doesn’t mean their decision is irrational; our opinion of rationality depends on our point of view. Similarly, just because the thief chose to steal the $100 cathode ray television rather than the $1000 3-D television does not mean their decision is irrational. Just as when we exchange one item for another it necessarily means that we value the item we receive greater than the item we give up in return, when we choose one course of action over another necessarily means that we believe our course of action is suited to the end we are aiming for. The end itself may not even be totally understood or acknowledged by the individual striving toward it, but it exists nonetheless.

If you want to continue defining rationality as your own subjective opinions on what is rational and what is not, go ahead; but don’t try to present it as scientific or empirical when you are doing nothing more that deifying your own values and doing not much more than palm-reading to try to quantify someone else’s subjective values. As we can see, rationality in the context of Austrian economics does not mean whether we think a means is conducive to a desired ends, or the layman’s definition of rationality. They are not the same thing and cannot be used interchangeably. Nor can value-maximizing be defined as “choosing the thing which will bring someone the greatest $ value, the greatest long-run happiness, the least amount of harm, or any other criterion that a behavioral economist will try to present as ‘rational,'” because that is not what value-maximizing means in the cintext of Austrian economics.

PS. After I wrote this, I found a more eloquent version of what I said on Mises.org by Michael Rozeff, so check that out too.

Woodrow Wilson: Prescient President

Quote

“Does not every American feel that assurance has been added to our hope for the future peace of the world by the wonderful and heartening things that have been happening within the last few weeks in Russia? Russia was known by those who knew it best to have been always in fact democratic at heart, in all the vital habits of her thought, in all the intimate relationships of her people that spoke their natural instinct, their habitual attitude toward life. The autocracy that crowned the summit of her political structure, long as it had stood and terrible as was the reality of its power, was not in fact Russian in origin, character, or purpose; and now it has been shaken off and the great, generous Russian people have been added in all their naive majesty and might to the forces that are fighting for freedom in the world, for justice, and for peace. Here is a fit partner for a League of Honor.” – Woodrow Wilson speaking of the communist Bolshevik Revolution in the soon to be Soviet Union, April 2, 1917. Who would have thought, Communist Russia: A Beacon of Freedom

Cato Unbound: The Absurd Libertarian Case for National Military Service

A while back, Cato Unbound posted an article titled “The Libertarian Case for National Military Service.” Its hard to imagine much greater of a contradiction in terms. Why not name it “The Libertarian Case for Slavery?” Articles like this are disturbing to say the least. Admittedly, this piece was in Cato Unbound, a platform for encouraging debate among controversial topics. However, this piece seems to be creating controversy where there actually is (almost) none. One can also imagine this sort of article being used by big government types as ammunition; “why, even libertarians support national military service!” I wouldn’t expect libertarians to make arguments like this for the same reason I wouldn’t expect a communist to make the “Communist Case for Private Ownership of the Means to Production”; namely, they wouldn’t actually be following basic axioms of their own theory to make it.

All that aside, it touches on important philosophical points. The article showcases the fundamental inconsistency of political libertarians who think taxes are legitimate. As Pileus Blog has explained, from a historical standpoint saying that libertarians support the legitimacy of taxes otherwise they are an anarchist is untrue, as past libertarian party platforms would attest. From a simply political standpoint, a libertarian can recognize taxes as legitimate, but it means that they must ignore the fundamental axioms of philosophical libertarianism to do so. (The non-aggression principle, right to self-ownership). Anytime libertarians deviate from these axioms, they’re necessarily not acting as consistent libertarians. A libertarian who does follow these axioms strictly is ultimately accepting anarchy. Strictly politically, libertarianism can cross over and include both anarchy and mild statism, but as a political philosophy, dedications to its axioms consistently means being an anarchist (this is a caveat many statist libertarians don’t like to hear).

At the end of the day, a libertarian conceding the principle of taxation removes any philosophical validity to their propositions and guts libertarianism of all its substance. Also, the author can call conscription/national military service a tax-in-kind, but it merely disguises its nature; namely that national military service is slavery. It rests on the assumption that we belong to the state and do not have ownership over our own bodies, an anti-libertarian position if there ever was one. Positions like like are totally repugnant to libertarians central axioms. What’s next, the libertarian case for the holocaust?

On Loyalty

Freedom does not demand unquestioning loyalty to the government, nor to or any other institution or individual; it is an artifice of the tyrant to weaponize the word patriotism and demand strict obedience to his capricious doctrines regardless of right or wrong. Patriotism is a willingness to question and even oppose the government in pursuit of what is right. Loyalty is only useful to the individual whose actions are not worthy of inspiring voluntary association; they demand fealty in spite of their misdeeds and infidelity to the principles their associates share. Often, loyalty is demanded of individuals to the leader who acts contrary to their followers principles in the name of protecting these sacred principles themselves. Thus, it is those whom are accused of being disloyal who have actually retained their loyalty to their principles, rather than the leader who only pays lip service to them.

In short, unbending loyalty is only demanded by those whose actions do not inspire it. Let those without conscience persist in a servile state and have the chains of despotism operate as a noose upon the neck of their liberty. It is the ability to distinguish between, and act upon, right and wrong that is the characteristic of a true patriot in pursuit of liberty. One who cannot think for himself may find some use in living according to the gospel of loyalty. However, those with a modicum of dignity recognize their only duty is to be true to themselves and their principles despite any incendiary pejorative to the contrary. A true patriot cannot condone the existence and continuance of injustice committed by the State, manifestly sanctioned for purpose of protecting of those same individuals.

What honor is there in loyalty to Adolph Hitler? What is commendable about professing loyalty to a tyrannical government? What distinction is there in sacrificing one’s character to the dogmatic faith of government infallibility? There can be no honor in loyalty to a principle or person that is not honorable or does not act honorably. Honor is only conferred if the underlying principles one is loyal to are virtuous. Reductio ad absurdum, it is evident loyalty lacks any legitimacy as a principle unto itself. It is only in the devotion to moral righteousness that loyalty bears any fruit. Those individuals with character are the ones who will stand up for justice when their leaders actions only evince contempt for the principles they hold most dear. Anyone can roll over and allow the government to do whatever it pleases; consent is easy. Dissent is onerous; only a courageous few are willing to take a principled stand and refuse to allow any concessions to the State at personal risk to their own life, liberty and property. These few should be lauded as they are the bulwark of liberty.